The Chancellor has announced a new micro-loan scheme to assist small businesses affected by the Covid-19 Lockdown.
Under the scheme small businesses will be able to apply for ‘bounce-back’ loans, which will be free of interest for the first 12 months. Small businesses can claim up to the value of 25% of their turnover and a maximum amount of £50,000. No repayment will be required in the first 12 months and the loans will be administered by government accredited lenders.
These loans will be available from banks from 9am on Monday 4th May 2020 and according to the Chancellor in most cases will be available with 24 hours of application. The chancellor has further announced on twitter that “there will be no forward looking tests of business viability; no complex eligibility criteria, just a quick standard form for businesses to fill in”.
Of note is the government promise to guarantee the loans to the amount of 100%. A guarantee means that if the borrower cannot meet the repayments of the loan, the Guarantor ( i.e. the government in this case) can be asked to meet the obligations of the debtor.
It is important to understand that if the guarantor pays the debt in such circumstances, then as a matter of law, the general principal is that the guarantor then becomes the new creditor of the debtor ( i.e. the small business) and can in principle pursue the debtor for the sums paid out.
Other options for small business include claiming Universal Credit, and the Coronavirus self-employment income support scheme, which opens in mid-May 2020 with payments announced to commence in June 2020. Under this scheme a taxable grant worth 80% of your trading profits up to a maximum of £2,500 a month can be claimed if eligibility criteria are met. The scheme is open for 3 months and if awarded does not need to be repaid.
Further information is available on the Gov.uk website:
Coronavirus Self-Employment Income Support Scheme
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